All Cool Again? Bitcoin Investors Be Cautious

The price of Bitcoin plunged to a new bear market low of $15,487 on Monday after rumors intensified that Genesis Trading and Digital Currency Group (DCG), which also owns Grayscale with its 635,000 BTC strong GBTC, would go bankrupt.

Since then, the Bitcoin price has been registering a relief rally. At press time, Bitcoin was trading at $16,598 and faced the crucial resistance zone at $16,000. If this resistance is overcome, a quick candle to $17,500 to $18,000 could be on the table.

DCG /Genesis Safe?

Bitcoin investors, however, may be wondering what has changed in all the fuss surrounding Genesis / DCG and Grayscale?

DCG CEO Barry Silbert released a purported letter to investors yesterday. In it, the CEO explained that while DCG owes $575 million to its own trading arm, Genesis Trading, it doesn’t until May 2023.

Silbert also emphasized that DCG will have revenues of $800 million in 2022. While this represents a decrease of about 20% from the previous year, Silbert said that revenues should still be enough to pay Genesis.

Further, the CEO of DCG also confirmed that the company owes Genesis $1.1 billion on a promissory note that matures in June 2032 and is related to the default of Three Arrows Capital.

“Genesis management and their board have decided to hire financial and legal advisors, and the company is exploring all possible options amid the aftermath of the FTX implosion,” Silbert asserted in his letter, adding that “we will let you know if we decide to do financial circle.”

The letter seems to have calmed the market. However, Crypto-Twitter is still confused about possible scenarios of how DCG can overcome its precarious financial situation. One of the main sources of rumors in recent days Andrew Parish, co-founder of ArchPublic, continues to claim internal, anonymous sources.

VC/Lawyer who saw @DCGco data room at the top of the hat:

“Current valuations are way off, passives dwarf assets… almost impossible not to see a DCG bankruptcy soon after Genesis.”

— Andrew (@AP_ArchPublic) November 22, 2022

Parish accuses DCG of bluffing and claims Silbert’s memo was not sent to investors. He claims to have heard from several DCG and Genesis investors and creditors:

This wasn’t sent to us first, we didn’t see it until it was posted online/twitter.

It’s all optics to mitigate Genesis bankruptcy for DCG… and lawsuits that will follow.

A Perfect Solution?

Parish also rejected the supposed “solution” of Messari co-founder Ryan Selkis. Selkis suggested that some of the Genesis creditors could convert their claims into DCG preferred or debt and guarantees (“the Buffett-Goldman deal”), “perhaps led by a reputable debt or growth fund”.

There are many things that have led to this chaos, but the current situation seems salvageable. I have no interest in this directly, just want to see a good resolution, and there is not much time.

Parish fought back that DCG and Genesis “still have to have any significant dialogue with Genesis creditors”, as he was told by supposedly important investors.

So what’s the deal? No one knows at the moment, except presumably DCG CEO Barry Silbert! Stay safe.